Question about Milton Friedman/Great Depression?

For those who know more about economics than I do, I saw a video of Milton Friedman discussing the Great Depression and the Federal Reserve's role in it, and he was saying that it is not the proper job of the Federal Reserve to control interest rates, but it is the Fed's job to control the supply of money, and that when people rushed the banks and they couldn't give people their money, that the Fed should have expanded the money supply so that people would see that they could get their money, and if people saw that they could get their money, then no one would have have tried to take it and there would be no rush.

It doesn't sound quite right, and I've heard Ron Paul and other Austrian economists says that the Federal Reserve shouldn't control the money supply either. Would someone mind clarifying for me?

Freidman was a monetarist. I believe he started to come around later in life, though.

"And now that the legislators and do-gooders have so futilely inflicted so many systems upon society, may they finally end where they should have begun: May they reject all systems, and try liberty; for liberty is an acknowledgment of faith in God and His works." - Bastiat

"It is difficult to free fools from the chains they revere." - Voltaire

Whoever controls the money supply controls the people. In a free society each individual controls his/her own money supply. In a tyrannical society the money supply is controlled by rulers who adjust the money supply to benefit themselves and their pet projects.

For those who know more about economics than I do, I saw a video of Milton Friedman discussing the Great Depression and the Federal Reserve's role in it, and he was saying that it is not the proper job of the Federal Reserve to control interest rates, but it is the Fed's job to control the supply of money, and that when people rushed the banks and they couldn't give people their money, that the Fed should have expanded the money supply so that people would see that they could get their money, and if people saw that they could get their money, then no one would have have tried to take it and there would be no rush.

It doesn't sound quite right, and I've heard Ron Paul and other Austrian economists says that the Federal Reserve shouldn't control the money supply either. Would someone mind clarifying for me?

Yes, that's what he believes they "should have" done to deal with the Depression but that doesn't mean he supported Fed as it existed then or as it exists today. In fact, he wanted to get rid of discretionary powers of Fed/government to control moneysupply, instead he preferred that moneysupply be increased at a steady rate irrespective of prevailing economic conditions in order to obtain a stable economy - http://en.wikipedia.org/wiki/Friedman's_k-percent_rule

So he diverges from the Austrian view that moneysupply needn't grow to support a growing economy, he shared the more mainstream view that it does need to grow. On the other hand, he did agree with Austrian view of the role of FRB (fractional-reserve-banking) as a destabiliser of the economy & cause of Business Cycles of booms & busts & that discretionary central-banking only aggravates the issue.

So far as Austrians are concerned, there's little doubt that moneysupply doesn't need any controlling or growth for a continually growing economy because growth of the economy depends on utilization of economic resources like land, labor & capital being free to be utilized under a free market system. Giving government any power to control & increase moneysupply will only result in them trying to benefit themselves from it, & in that sense, like many other proponents of free markets who believe in coercive government, Friedman comes off as hypocritical in recognizing the problems & corruption that government leads to in other areas & yet insisting on allowing government to continue to have the power to issue money.
There was some speculation that he was coming around to gold-standard near the twilight of his life.

Just as we don't need central-planning in agriculture or industry, we don't need central-planning in money, markets will take care of it. As the purchasing-power of gold increases as it demand goes up, digging up more gold at a faster rate will become more profitable & supply will increase accordingly. If gold somehow turns out not to be the best form of money or other better forms of money emerge on the market then they will be voluntarily chosen by people, based on merit.

Last edited by Paul Or Nothing II; 11-09-2012 at 02:10 PM.

There is enormous inertia — a tyranny of the status quo — in private and especially governmental arrangements. Only a crisis — actual or perceived — produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable
- Milton Friedman

Yes, that's what he believes they "should have" done to deal with the Depression but that doesn't mean he supported Fed as it existed then or as it exists today. In fact, he wanted to get rid of discretionary powers of Fed/government to control moneysupply, instead he preferred that moneysupply be increased at a steady rate irrespective of prevailing economic conditions in order to obtain a stable economy - http://en.wikipedia.org/wiki/Friedman's_k-percent_rule

So he diverges from the Austrian view that moneysupply needn't grow to support a growing economy, he shared the more mainstream view that it does need to grow. On the other hand, he did agree with Austrian view of the role of FRB (fractional-reserve-banking) as a destabiliser of the economy & cause of Business Cycles of booms & busts & that discretionary central-banking only aggravates the issue.

So far as Austrians are concerned, there's little doubt that moneysupply doesn't need any controlling or growth for a continually growing economy because growth of the economy depends on utilization of economic resources like land, labor & capital being free to be utilized under a free market system. Giving government any power to control & increase moneysupply will only result in them trying to benefit themselves from it, & in that sense, like many other proponents of free markets who believe in coercive government, Friedman comes off as hypocritical in recognizing the problems & corruption that government leads to in other areas & yet insisting on allowing government to continue to have the power to issue money.
There was some speculation that he was coming around to gold-standard near the twilight of his life.

Just as we don't need central-planning in agriculture or industry, we don't need central-planning in money, markets will take care of it. As the purchasing-power of gold increases as it demand goes up, digging up more gold at a faster rate will become more profitable & supply will increase accordingly. If gold somehow turns out not to be the best form of money or other better forms of money emerge on the market then they will be voluntarily chosen by people, based on merit.

I saw a video of Milton Friedman discussing the Great Depression and the Federal Reserve's role in it, and he was saying that it is not the proper job of the Federal Reserve to control interest rates, but it is the Fed's job to control the supply of money

One problem with this is that the Fed can't really do the one thing without also doing the other.

Other things being equal: the "looser" the supply of money, the lower interest rates will be - the "tighter" the supply of money, the higher interest rates will be.

"A free man must be able to endure it when his fellow men act and live otherwise than he considers proper. He must free himself from the habit, just as soon as something does not please him, of calling for the police." -- Ludwig von Mises, Liberalism (p. 55)

"The evil that a man inflicts on his fellow man injures both - not only the one to whom it is done, but also the one who does it. Nothing corrupts a man so much as being an arm of the law and making men suffer. The lot of the subject is anxiety, a spirit of servility and fawning adulation; but the pharisaical self-righteousness, conceit, and arrogance of the master are no better. [...] The criminal has incurred the penalties of the law, but not the hate and sadism of the judge, the policeman, and the ever lynch-thirsty mob." -- Ludwig von Mises, Liberalism (p. 58) [bold emphasis added]

Yes, that's what he believes they "should have" done to deal with the Depression but that doesn't mean he supported Fed as it existed then or as it exists today. In fact, he wanted to get rid of discretionary powers of Fed/government to control moneysupply, instead he preferred that moneysupply be increased at a steady rate irrespective of prevailing economic conditions in order to obtain a stable economy - http://en.wikipedia.org/wiki/Friedman's_k-percent_rule

There is absolutely no escaping the fact that even the very decision to have centralized control over a centralized monetary supply, which is then "increased at a steady rate irrespective of prevailing economic conditions" is in itself an exercise of "discretionary powers" (of the Fed/government) with regard to a FIAT money supply. Somewhere along the line, someone other than the billions of individuals in the market itself, is in a position to decide (CENTRALLY) what that "steady rate of increase" ought to be.

Friedman was a statist and a monetarist in the same way that I'm a socialist whenever I live in China; not by principled belief, but only by acquiescence, or acceptance of a playing field that neither of us advocated nor designed. Friedman did not believe that "money supply" was something that ought to be centralized, and centrally controlled, so much as he accepted that it would be anyway. When in Rome... He didn't argue against the Fed's existence, so much as its "proper role", which he felt was being misused, improperly applied, or abused.

Friedman said, "I regard a return to a gold standard as neither desirable nor feasible—with the one exception that it might become feasible if the doomsday predictions of hyperinflation under our present system should prove correct."

It is for that reason that I view Friedman as a pragmatist. He was not so much in favor of a Fed, or fiat currency, or centralized control over a money supply, so much as a realist. The only reason he did not regard a return to a gold standard as desirable or feasible had nothing to do with gold, and everything to do with his firm belief that "there is essentially no government in the world that is willing to surrender control over its domestic monetary policy.". So you could have a "gold standard" all you want -- that will not prevent it from being debauched, debased, with an economy that is distorted anyway as a result. So Friedman accepted—even surrendered—to central statist/monetarist monetary policy control paradigm as the prevailing reality that must be addressed, since it would not go away.

In essence, Friedman was saying, "If you are all going to insist on centrally $#@!ing with the money supply, as I believe you always will anyway, at least do it in a manner that is reasonable, consistent, and not subject to political or economic whims."

Whoever controls the money supply controls the people. In a free society each individual controls his/her own money supply. In a tyrannical society the money supply is controlled by rulers who adjust the money supply to benefit themselves and their pet projects.

In essence, Friedman was saying, "If you are all going to insist on centrally $#@!ing with the money supply, as I believe you always will anyway, at least do it in a manner that is reasonable, consistent, and not subject to political or economic whims."

I've always marvelled at the ability of intelligent & perceptive "realists" like Friedman to be so selective (read: half-assed) in the application of "realism."

If your characterization of Friedman's position is accurate (and I don't dispute that it is), it amount to this: Friedman is "realistic" enough to understand that "[they] are all going to insist on centrally $#@!ing with the money supply."

But granting that, what in world induces such a "realist" to imagine or expect that "they" would (or even could) do so "in a manner that is reasonable [and] consistent" - let alone in manner that is "not subject to political or economic whims" ... ?

That's what I've never been able to figure out. Friedman was NOT a stupid man. So why was he so obtuse on this point?

I think he meant well and was a good man, and a friend of liberty. But "realists" who indulge such fancies (however implicit they may be) have no business criticizing others for being "impractical" - which Friedman was wont to do.

Last edited by Occam's Banana; 11-09-2012 at 06:32 PM.

"A free man must be able to endure it when his fellow men act and live otherwise than he considers proper. He must free himself from the habit, just as soon as something does not please him, of calling for the police." -- Ludwig von Mises, Liberalism (p. 55)

"The evil that a man inflicts on his fellow man injures both - not only the one to whom it is done, but also the one who does it. Nothing corrupts a man so much as being an arm of the law and making men suffer. The lot of the subject is anxiety, a spirit of servility and fawning adulation; but the pharisaical self-righteousness, conceit, and arrogance of the master are no better. [...] The criminal has incurred the penalties of the law, but not the hate and sadism of the judge, the policeman, and the ever lynch-thirsty mob." -- Ludwig von Mises, Liberalism (p. 58) [bold emphasis added]

After reading the book, Free to Choose by Milton Friedman he became a hero of mine. He and his wife put together a book that made many of the mechanics of economics fairly easy to comprehend. It was written in plain English. We probably have Mrs. Rose D. Friedman to thank for that but Mr. Friedman was a regular guy also.

I think not only did a lot of good come out of his teachings but also some bad. He gave people a tool and I think like children, we did what children would do and tested things out in both directions. Good and bad. I'm thinking we are ahead two to one at this point.

Anyway many of the rules seem to work like a chain of teeter totters touching ends and forming a geometric shape like a square. They need to all be in balance to run steady. If you push down on one to far at the other end they rise up. It transfers through the other teeter totters like a wave. Like learning to drive, maybe we have a tenancy to over steer.

Anyway enough of the bull.

Take a look at what we had done to ourselves right before the depression on this chart. During World War One we counterfeited the money supply to finance the war. Unlike the earlier times when we did the same thing, this time it looks like we didn't started working the counterfeit out of the system like we had done before. I would think to retire the counterfeit it would have to be taxed out of the system and basically burned. I would think that could be done in many was. Many ways that could take advantage of the unsuspecting. Maybe someone had a brainy idea at the time to stiff the other guy and killed him off financially. It sure did crash when it did go down. (And then someone fired up the fake money presses and we never did fully recover.)

But Odin,

If Milton Friedman said they should have introduced more counterfeit at the time, I would have like to argue the point with him. (Right at the moment I'm wonder at exactly which point.)

Then on the other hand if he would have changed his mind and thought pulling some out the right thing, that would have been fun to argue that out with him also.

He seemed the kind of guy that could see and argue both sides. I've heard of him changing sides often. It is like practicing law. You may need to understand how to argue both sides of an argument. With economics like I said before, I don't think there is necessarily any hard and fast right or wrong answer, but it's like a chain of sea saws that need to be adjusted carefully.

Well carefully if your chancing getting strung out on the counterfeit.

But granting that, what in world induces such a "realist" to imagine or expect that "they" would (or even could) do so "in a manner that is reasonable [and] consistent" - let alone in manner that is "not subject to political or economic whims" ... ?

That's what I've never been able to figure out. Friedman was NOT a stupid man. So why was he so obtuse on this point?

I don't think he was being obtuse, to be honest. It is certainly valid to question whether reasonableness or consistency is even possible by the very government that chose to debase a currency, or inflicted economic distortions based on centrally planned monetary debasement. But I don't think that was Friedman's objective at all. I seriously doubt that he had any illusions there. I could be dead wrong, of course, but I think he was just taking a different tack in leading the ignorant and unwilling horses to water--those ignorant of money, banking and finance to begin with. He might well have thought it best to address the principles involved from current reality standpoint, regardless how distorted, and how do we "get there from here", even if in specific steps, and not one giant leap. It is much easier to apply a theory or principle to real world conditions than it is to construct an ideal from scratch, which bears little resemblance to the real world, and can therefore be relegated as such (not real world) and dismissed as so much fanciful thinking.

It appears to me that Friedman was trying to get people to understand, at the very least, the core principles that really do apply to all currencies anyway--free market and fiat--and the relationship that scarcity plays regardless, especially in a growing economy. If they can get that far in their understanding, or acceptance of the principles, even in theory, then perhaps they can finally reach the natural conclusion that the best means to that end is what the hard specie advocates had been advocating all along. The danger in that, of course, is that by accepting the "current reality" as even an hypothetical premise for a model, you appear to affirm the overall acceptability or desirability of the premise itself.

For those who know more about economics than I do, I saw a video of Milton Friedman discussing the Great Depression and the Federal Reserve's role in it, and he was saying that it is not the proper job of the Federal Reserve to control interest rates, but it is the Fed's job to control the supply of money, and that when people rushed the banks and they couldn't give people their money, that the Fed should have expanded the money supply so that people would see that they could get their money, and if people saw that they could get their money, then no one would have have tried to take it and there would be no rush.

It doesn't sound quite right, and I've heard Ron Paul and other Austrian economists says that the Federal Reserve shouldn't control the money supply either. Would someone mind clarifying for me?

The video has a segment on a bank that avoided a run by getting customers in and out of the door as fast as possible the first day, then delaying the customers as long as possible the second day while money got delivered. If the government had expanded the money supply, instead of contracting it, banks would have been able to get more money to their vaults to hand out to people withdrawing --- keeping the lines down, reassuring crowds that they are solvent and have money, and reducing psychological factors that incite panics and bank runs that make banks insolvent/collapse.

For Milton's position on the Fed, In 1992, the Minneapolis federal reserved asked Milton Friedman, “what’s the biggest economic challenge facing the US?” Friedman told them, “The #1 economic challenge facing the US is ‘how do we get rid of the Federal Reserve?’”

Milton's speaking series called "Milton Friedman Speaks" is great too.

Friedman and others basically found out (by using econometrics) that recessions always follow after a contraction of the money supply. They argued that therefore, if this could be prevented, we wouldn't experience these recessions.

Austrian economists view it quite differentely and yet very similar in some sense. Most of them would actually agree that an increase in the money supply theoretically could have "prevented" the Great Depression from occurring in that time, at least in the short run. In fact, if an increase in the money supply had no positive effect on economic growth, the whole Austrian business cycle theory would be meaningless. However, the main difference is that while Friedman and other neo-classicals, Keynesians and monetarists view the whole economy as producing a single homogeneous output Y (by using homogeneous capital K and homogeneous labour L) in order to create practical mathematical models, Austrians beliefe that this simplification is hiding one of the most crucial properties of the economy, the capital structure.

They belief that while a recession is not desirable, it's the necessary correction of malinvestments, mainly caused by artificially low interest rates. Shortly after the Fed (and FDIC, etc.) was created it started to increase the money supply, causing interest rates to drop, giving more incentives to invest in long term projects like mining, housing, etc. And while this may sound like a desirable thing, it's actually bad, because in contrast to a decline in interest rates based on more savings, there was not enough purchasing power available at the time these investments turned into consumer goods, because nobody cut back on consumption at any point before. The result was a huge amount of failing businesses, causing chain reactions. So therefore, ironically I believe Austrians actually agree with Keynes, that too low aggregate demand is what we are experiencing during crises. But they argue that other schools of thought have the causation backwards. There is not enough aggregate demand to match the artificially pumped up producing of the wrong goods in the past, and the suggestion to lower interest rates, increase the money supply and/or increase public spending during crises is trying to cure the drug addict by giving him more drugs. It may delay the pain, but it will not cure the disease.

All this is mainly caused by the fact, that Y=KL hides fundamental truths about the economy. The common motto of neo-classical economists is that, "A map in a scale of 1:1 is useless." I don't disagree, but I would add that a map in the size of a thumbnail is just as useless.

The sad thing is that properties like capital structure are immensly hard to measure objectively. And even if we could, adding them into economic models seems almost impossible, because of the complexity we would arrive at.

Friedman and others basically found out (by using econometrics) that recessions always follow after a contraction of the money supply. They argued that therefore, if this could be prevented, we wouldn't experience these recessions.

Austrian economists view it quite differentely and yet very similar in some sense. Most of them would actually agree that an increase in the money supply theoretically could have "prevented" the Great Depression from occurring in that time, at least in the short run. In fact, if an increase in the money supply had no positive effect on economic growth, the whole Austrian business cycle theory would be meaningless. However, the main difference is that while Friedman and other neo-classicals, Keynesians and monetarists view the whole economy as producing a single homogeneous output Y (by using homogeneous capital K and homogeneous labour L) in order to create practical mathematical models, Austrians beliefe that this simplification is hiding one of the most crucial properties of the economy, the capital structure.

They belief that while a recession is not desirable, it's the necessary correction of malinvestments, mainly caused by artificially low interest rates. Shortly after the Fed (and FDIC, etc.) was created it started to increase the money supply, causing interest rates to drop, giving more incentives to invest in long term projects like mining, housing, etc. And while this may sound like a desirable thing, it's actually bad, because in contrast to a decline in interest rates based on more savings, there was not enough purchasing power available at the time these investments turned into consumer goods, because nobody cut back on consumption at any point before. The result was a huge amount of failing businesses, causing chain reactions. So therefore, ironically I believe Austrians actually agree with Keynes, that too low aggregate demand is what we are experiencing during crises. But they argue that other schools of thought have the causation backwards. There is not enough aggregate demand to match the artificially pumped up producing of the wrong goods in the past, and the suggestion to lower interest rates, increase the money supply and/or increase public spending during crises is trying to cure the drug addict by giving him more drugs. It may delay the pain, but it will not cure the disease.

All this is mainly caused by the fact, that Y=KL hides fundamental truths about the economy. The common motto of neo-classical economists is that, "A map in a scale of 1:1 is useless." I don't disagree, but I would add that a map in the size of a thumbnail is just as useless.

The sad thing is that properties like capital structure are immensly hard to measure objectively. And even if we could, adding them into economic models seems almost impossible, because of the complexity we would arrive at.

Love the explanation.

I have often wondered how this would all play out if humans had two hundred year lifespans, such that they inherited their own messes. I like to characterize the heroine trafficking result of Keynes' proposed methadone solution (and only as it was supposed to apply in certain cases, as a last resort) as a case where you really can become an addict, enjoy the high, and transfer all the pain, withdrawals, and even death in many cases, to yours and everyone else's grandchildren--selling and promising the unborn, as so much chattel, into slavery.

"The sad thing is that properties like capital structure are immensly hard to measure objectively. And even if we could, adding them into economic models seems almost impossible, because of the complexity we would arrive at."

It left me at the point that using a currency that has an intrinsic value in itself can remove the need to measure somewhat. Not that even that is perfect, as intrinsic values are always changing. They would tend to work through the changes at working pace, not blow up and down so much, but then again real assets do at times.

I have often wondered how this would all play out if humans had two hundred year lifespans, such that they inherited their own messes. I like to characterize the heroine trafficking result of Keynes' proposed methadone solution (and only as it was supposed to apply in certain cases, as a last resort) as a case where you really can become an addict, enjoy the high, and transfer all the pain, withdrawals, and even death in many cases, to yours and everyone else's grandchildren--selling and promising the unborn, as so much chattel, into slavery.

I think we all have bankruptcy as a option. Dieing wouldn't pass on the addiction.

I'm more concerned with me at the moment. I've had the counterfeiters leaching away at, all of my everything, since we went off of the gold standard. Actually before that, but big-time since 1971. Not that it has all been bad but I just can't help but wonder what if we would have been able to lead our own lives and each one of us had of been running full power. Making our own mistakes, then paying them in full, but learning and going forward.

We've been led around like sheep with a hog rings in our noses.

Shorn and taxed to the point we don't even have that special furry spot left!

It left me at the point that using a currency that has an intrinsic value in itself can remove the need to measure somewhat. Not that even that is perfect, as intrinsic values are always changing. They would tend to work through the changes at working pace, not blow up and down so much, but then again real assets do at times.

Well, not controlling the money supply would definitely make it less "important" to measure certain things. However, it is more of a scientific issue of understanding the world, than of policy. In fact our monetary policy results to a great deal from how most economists describe reality.

The only way to end the desire for state-control of the money supply permanently is to change the economic paradigm in academia by using their method and by critizing and improving the models - which is going to be extremely hard.

I think we all have bankruptcy as a option. Dieing wouldn't pass on the addiction.

I'm actually just as concerned about the ultimate way that bankruptcy in the aggregate can play out; the elephant in the room called war. Counterfeiting gets us more easily into wars, just as wars are a way of deciding who is going to pay for all the counterfeiting.

I'm more concerned with me at the moment. I've had the counterfeiters leaching away at, all of my everything, since we went off of the gold standard. Actually before that, but big-time since 1971. Not that it has all been bad but I just can't help but wonder what if we would have been able to lead our own lives and each one of us had of been running full power. Making our own mistakes, then paying them in full, but learning and going forward.

Me too. Big time. As a child and teen in the 70's, I watched us go through economic changes, and wanted to make sense of it all. My school teachers' simplistic answers to why prices always increased, and never decreased in the long term: Spiraling greed. To them it was that simple. Someone wanted more, and that forced everyone else into wanting more. Not one of them had the first clue about how money, banking and finance worked, let alone the role central banks played in any of that.

Not to split hairs, but we didn't "go off" the gold standard. It never went anywhere, and is still in effect. Our government finally just defaulted on obligations that were based on it back in 1971 (on other governments, most of which were in default themselves). That was in much the same way that FDR enforced a default on gold obligations to citizens. But the real default occurred long before Roosevelt's move, with countless contradictory RIGHT NOW claims on existing gold.

We've been led around like sheep with a hog rings in our noses.

Shorn and taxed to the point we don't even have that special furry spot left!

Not one of them had the first clue about how money, banking and finance worked, let alone the role central banks played in any of that.

Now that we are catching on to the way they work, they don't work that way anymore. They've seem to have killed real fundamentals of banking in both directions.

I too worry about the war. I can't imagine them giving up control easy. It might be strange if when it was held it could only last as long as the cash held out. Be a war that nobody came to...not that wars can't reach out.

I heard that during the American Revolution people refused to except the Continental Notes that were printed up to finance the war. Farmers just couldn't afford the loss.

There is absolutely no escaping the fact that even the very decision to have centralized control over a centralized monetary supply, which is then "increased at a steady rate irrespective of prevailing economic conditions" is in itself an exercise of "discretionary powers" (of the Fed/government) with regard to a FIAT money supply. Somewhere along the line, someone other than the billions of individuals in the market itself, is in a position to decide (CENTRALLY) what that "steady rate of increase" ought to be.

Friedman was a statist and a monetarist in the same way that I'm a socialist whenever I live in China; not by principled belief, but only by acquiescence, or acceptance of a playing field that neither of us advocated nor designed. Friedman did not believe that "money supply" was something that ought to be centralized, and centrally controlled, so much as he accepted that it would be anyway. When in Rome... He didn't argue against the Fed's existence, so much as its "proper role", which he felt was being misused, improperly applied, or abused.

Friedman said, "I regard a return to a gold standard as neither desirable nor feasible—with the one exception that it might become feasible if the doomsday predictions of hyperinflation under our present system should prove correct."

It is for that reason that I view Friedman as a pragmatist. He was not so much in favor of a Fed, or fiat currency, or centralized control over a money supply, so much as a realist. The only reason he did not regard a return to a gold standard as desirable or feasible had nothing to do with gold, and everything to do with his firm belief that "there is essentially no government in the world that is willing to surrender control over its domestic monetary policy.". So you could have a "gold standard" all you want -- that will not prevent it from being debauched, debased, with an economy that is distorted anyway as a result. So Friedman accepted—even surrendered—to central statist/monetarist monetary policy control paradigm as the prevailing reality that must be addressed, since it would not go away.

In essence, Friedman was saying, "If you are all going to insist on centrally $#@!ing with the money supply, as I believe you always will anyway, at least do it in a manner that is reasonable, consistent, and not subject to political or economic whims."

I wanted to rep you for this post good sir but it says I need to spread the rep around before I can. Well said.

I am a big admirer of Friedman for he was a big reason I became a Libertarian. He explained things wonderfully and was a great asset to our cause. His pragmatism and realism should be admired not shunned. Its a shame some of the "Purist" elements of our movement fail to see this and cast him out as some sort of statist akin to Stalin for trying to work within the system.